City of Oakland v. Lynch

Citation798 F.3d 1159
Decision Date20 August 2015
Docket NumberNo. 13–15391.,13–15391.
PartiesCITY OF OAKLAND, Plaintiff–Appellant, v. Loretta E. LYNCH, Attorney General of the United States; Melinda Haag, United States Attorney for the Northern District of California, Defendants–Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Cedric C. Chao (argued), Stanley J. Panikowski, Roy K. McDonald, Kathleen S. Kizer, and Saori Kaji, DLA Piper LLP (US), San Francisco, CA; Barbara J. Parker and Kiran C. Jain, Oakland City Attorney, Oakland, CA, for PlaintiffAppellant.

Stuart F. Delery, Assistant Attorney General, Melinda Haag, United States Attorney, Mark B. Stern and Adam C. Jed (argued), Attorney, Civil Division, United States Department of Justice, Washington, D.C., for DefendantsAppellees.

Appeal from the United States District Court for the Northern District of California, Maria–Elena James, Magistrate Judge, Presiding. D.C. No. 3:12–cv–05245–MEJ.

Before: RICHARD C. TALLMAN and JOHNNIE B. RAWLINSON, Circuit Judges, and STEPHEN JOSEPH MURPHY, District Judge.*

OPINION

MURPHY, District Judge:

I. INTRODUCTION

The City of Oakland contests the Government's filing of a civil in rem forfeiture action against Harborside Health Clinic, a medical marijuana dispensary acting in accordance with local and state laws but in violation of the Controlled Substances Act. Because Oakland lacks a property interest in Harborside, it was unable to participate in the forfeiture action. Instead, Oakland initiated a collateral attack against the Government under the Administrative Procedure Act. The Government moved for dismissal pursuant to Rule 12(b)(1), for lack of subject matter jurisdiction, and Rule 12(b)(6), for failure to state a claim.

Oakland appeals from the district court's order granting dismissal for lack of subject matter jurisdiction. The Government asserts that Oakland lacks Article III standing, that judicial review is precluded, and that, if the APA applies, Oakland's suit is barred because the forfeiture action does not constitute “final agency action” and because Oakland has another “adequate remedy in court.” We have jurisdiction under 28 U.S.C. § 1291. We conclude that Oakland has Article III standing, but that judicial review is precluded. We therefore affirm the district court.

II. BACKGROUND

On July 9, 2012, the United States filed a civil in rem forfeiture action pursuant to 21 U.S.C. § 881(a)(7) against the real property and improvements located at 1840 Embarcadero, Oakland, California. United States v. Real Prop. & Improvements Located at 1840 Embarcadero, Oakland, Cal., Case No. C 12–3567. The action targeted Harborside Health Center, a retail marijuana store that distributes medical marijuana legally under state law but allegedly in violation of the Controlled Substances Act (“CSA”), 21 U.S.C. §§ 841 and 856. Because of Harborside's purported violations of the CSA, the Government asserts the property is subject to forfeiture. 21 U.S.C. § 881(a)(7).

Pursuant to 18 U.S.C. § 983 and Rule G of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions, [a] person who asserts an interest in the defendant property may contest the forfeiture by filing a claim in the court where the action is pending.” Fed.R.Civ.P. Supp. R. G(5)(a)(i). Because Oakland does not assert an interest in the Harborside property, it did not file a claim in the forfeiture action.

Instead, Oakland filed the instant action, seeking a “declaratory judgment that Defendants and any agency under their authority have no right to seek civil forfeiture of the real property located at 1840 Embarcadero, Oakland, California based on purported violations of the Controlled Substances Act,” as well as injunctive relief prohibiting the Government from seeking forfeiture of the property. The Government moved to dismiss Oakland's complaint pursuant to Federal Rule of Civil Procedure 12(b)(1), for lack of subject matter jurisdiction, and Rule 12(b)(6), for failure to state an actionable claim.

Oakland asserts federal question jurisdiction under the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 701 –706. Although the United States is generally immune from suit, the APA waives sovereign immunity and provides for judicial review of executive action if certain requirements are met. Match–E–Be–Nash–She–Wish Band of Pottawatomi Indians v. Patchak, –––U.S. ––––, 132 S.Ct. 2199, 2204, 183 L.Ed.2d 211 (2012). Generally, a plaintiff must be seeking non-monetary relief for legal wrongs resulting from a final action undertaken by an agency or by an agency officer or employee. Id. The plaintiff must also show a lack of another adequate judicial remedy. 5 U.S.C. § 704. In this case, the district court granted the Government's 12(b)(1) motion, finding both that the Government's action was not final under the APA, and that Supplemental Rule G(5)(a)(i) constitutes an adequate judicial remedy. Because the district court found it lacked subject matter jurisdiction, it did not consider the Government's 12(b)(6) motion.

Oakland timely appealed from the district court's decision. In addition to the issue of whether the district court has subject matter jurisdiction over Oakland's action for declaratory judgment and injunctive relief, the Government questions, for the first time, whether Oakland has standing to sue.

III. STANDING

On appeal, the Government asserts that Oakland lacks standing under Article III.1 “A suit brought by a plaintiff without Article III standing is not a ‘case or controversy,’ and an Article III federal court therefore lacks subject matter jurisdiction over the suit.” Cetacean Cmty. v. Bush, 386 F.3d 1169, 1174 (9th Cir.2004). “If a plaintiff lacks Article III standing, Congress may not confer standing on that plaintiff by statute.” Id. Because constitutional standing implicates jurisdiction, “a challenge to constitutional standing is one ‘which we are required to consider, even though raised for the first time on appeal.’ Laub v. U.S. Dep't of Interior, 342 F.3d 1080, 1085 (9th Cir.2003) (quoting Newdow v. U.S. Congress, 313 F.3d 500, 503 (9th Cir.2002) ).

Standing requires injury, causation, and redressability. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). [A]n injury must be concrete, particularized, and actual or imminent....” Clapper v. Amnesty Int'l USA, ––– U.S. ––––, 133 S.Ct. 1138, 1147, 185 L.Ed.2d 264 (2013) (internal citations and quotation marks omitted). The Government does not dispute that, if Oakland demonstrates an injury “fairly traceable to the challenged action,” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 180, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000), it would be redressable by a favorable decision.

Oakland cites three direct injuries. First, it asserts injury from an expected loss of tax revenue. Second, it states that it “will suffer a rise in crime and diversion of police resources due to the increase in black market sales of cannabis that will follow if the forfeiture action succeeds.” Third, Oakland argues that a forfeiture of the Harborside dispensary will injure its “proprietary interest in regulating and taxing medical cannabis and providing patients safe and affordable access to medicinal quality cannabis in accordance with California law.” Because we find the expected loss of tax revenue constitutionally sufficient, we decline to address the other two alleged injuries.2

Oakland projected it would receive more than $1.4 million in tax revenues from the city's four permitted dispensaries in 2012, “enough to pay for a dozen badly needed additional police officers or firefighters.” A substantial portion of this sum would be attributable to Harborside, as it is “reputed to be the largest dispensary in the country.” As of October 10, 2012, Harborside had “paid city and state taxes in excess of one million dollars,” and “customers pay an 8.75% sales tax on all purchases.”

An expected loss of tax revenue can constitute a sufficient injury for purposes of Article III standing. In City of Sausalito v. O'Neill, Sausalito, California brought suit to enjoin the National Park Service (“NPS”) from implementing a plan to develop and rehabilitate a former military base adjacent to the city. 386 F.3d 1186, 1194 (9th Cir.2004). Sausalito alleged the plan violated a number of environmentally-oriented federal statutes. Id. To establish Article III injury, it cited the harm that would result from the addition of an expected 2,700 daily visitors to the city, including congested roadways, increased crime, and lost sales and property tax revenue (“due to impaired vehicular movement and commerce rendering Sausalito less attractive to business”). Id. at 1198. The district court held that Sausalito sufficiently demonstrated Article III injury, and we affirmed, finding the asserted harm “cognizable as both an aesthetic injury and ... as an economic injury.” Id. at 1198–99.

Oakland's expected loss of tax revenue satisfies the requirements of Article III. In Sausalito, it was conceded that the NPS plan would “result in an increase in local traffic, an increase in air pollutant emissions, and an incremental contribution to the cumulative noise environment.” Id. at 1199. Because Sausalito alleged “that the aesthetic damage will erode its tax revenue,” we found economic injury that was actual or imminent, and not conjectural or hypothetical. Id. Oakland's injury is even less speculative. If Harborside is closed, it will no longer provide Oakland with tax revenue, either directly through income taxes or indirectly through customer sales taxes. And our precedent makes clear that the deprivation of revenue constitutes injury under Article III.

The Government's argument to the contrary is unavailing. It argues that Oakland's “claim of lost tax revenues” is uncertain, because it “assumes that a forfeiture will be ordered, that marijuana sales are not diverted to other...

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